A simple method for testing cointegration subject to regime changes
In this paper, we propose a simple method for testing cointegration in models that allow for multiple shifts in the long run relationship. The procedure consists of computing conventional residual-based tests with standardized residuals from Markov switching estimation. No new critical values are needed. An empirical application to the present value model of stock prices is presented, complemented by a small Monte Carlo experiment.
|Date of creation:||2001|
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- Gregory, Allan W. & Hansen, Bruce E., 1996.
"Residual-based tests for cointegration in models with regime shifts,"
Journal of Econometrics,
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